Manufacturing Surge Anticipated: 360 ONE AMC Bets India’s Economic Future Hinges on Domestic Production

Manufacturing Surge Anticipated: 360 ONE AMC Bets India’s Economic Future Hinges on Domestic Production​

Amid ongoing geopolitical uncertainty, 360 ONE AMC maintains that market turbulence must be distinguished from genuine risk. Mayur Patel, President and Fund Manager for Listed Equities at the firm, projects that while the June quarter may face headwinds due to crude oil prices, manufacturing will ultimately define India's investment trajectory over the next decade.

Patel emphasizes that investors should embrace volatility, provided they remain focused on protecting capital. The AMC’s portfolios are structured not defensively against short-term noise, but rather for the secular rally expected once the global conflict subsides.

Decoupling Volatility from Permanent Risk in Markets​

Addressing recent geopolitical tension, Patel noted that the media narrative often exaggerates the threat level. He asserts there is a clear difference between short-term volatility and permanent risk. The AMC's long-only investment perspective demands focusing on fundamental stability rather than daily market fluctuations.

He views current tensions as short-term volatility rather than an enduring systemic risk, noting that prolonged conflict would fall into a definable risk category. This view is tempered by the observation that both involved parties likely cannot afford to drag the situation indefinitely.

June Quarter Outlook and Economic Pressures​

The outlook for the June quarter remains cautious due to external economic pressures affecting nearly every sector. As India is a net importer of crude, elevated oil prices are putting pressure on corporate margins across various industries.

Despite these challenges, underlying economic growth is described as resilient, with GDP figures having surprised positively. Supply-chain disruption from conflict exists but is deemed non-severe. The real impact is concentrated on shrinking profit margins for companies.

Sector sentiment is also affected, with commercial vehicle stocks pausing purchases due to uncertainty over diesel prices and the broader market environment. Patel anticipates a more secular rally starting in the second half of fiscal year, particularly in December and March quarters. He advises investors to look beyond Nifty, noting that stronger earnings upgrades are likely concentrated within the broader BSE 500 universe.

FII Flows and Market Valuation Attraction​

From an Foreign Institutional Investor (FII) perspective, Patel sees significant attraction points emerging in the Indian market. Foreign investment flows have been negative for four years, making the entry point attractive according to his view. The currency at Rs 95 is considered oversold, with a fair value closer to Rs 90 based on relevant measures.

Nifty is trading around three times price-to-book, which aligns closely with its median of about 3.1 times over the last quarter century. While interest has markedly improved in recent weeks across Asia-Pacific and Europe among regular meetings with foreign investors, caution persists pending greater clarity on global events.

The Decisive Power of Manufacturing and AI Opportunities​

Patel states definitively that if he had to define India's next decade, it would be a manufacturing story. This theme encompasses everything from power equipment and renewables to the rising field of semiconductors.

The artificial intelligence (AI) trend is structural and cannot be ignored over the next five years. However, India currently lacks several large listed companies serving as primary AI front-runners. The opportunity lies in becoming a beneficiary of critical infrastructure development, specifically AI data centres. These centres require an estimated Rs 10 lakh crore investment across projected 14 gigawatts of capacity within the next five to seven years.

This creates multiple market opportunities spanning cables and wires, diesel generator sets, switchgears, transformers, and power transmission equipment. Meanwhile, large-cap IT services face structural deflation due to legacy business vulnerability, necessitating that these firms urgently acquire niche AI capabilities.

Financial Strength and Sectoral Positioning​

The outlook for the financials sector remains positive despite its high benchmark allocation. The AMC maintains a moderate overweight position due to improving system credit growth within private banks, which saw rates recover from 9% to approximately 16-17%.

NBFCs are also positioned strongly due to improved consumption and resilience in the commercial vehicle cycle. Furthermore, expected FCNR(B) inflows—potentially ranging between $50-$60 billion, with total potential near $80 billion including tax removal—are anticipated to boost system liquidity for banks.

Flexibility Drives Alpha Beyond Large Caps​

The AMC differentiates its approach by maintaining a genuinely flexible strategy across all market caps. Instead of prescribing fixed allocations, the investment decisions are an outcome of finding the best opportunities using the SCDV (Secular, Cyclical, Defensive and Value Traps) framework.

While large-cap exposure previously reached 62%, it has since been reduced to around 45%. Currently, roughly 50% of the portfolio is allocated to small and mid-caps combined. This flexible, bottom-up approach has enabled the fund to generate alpha by capitalizing on broader market opportunities.